CENTRAL ASSAM ELECTRICITY DISTRIBUTION COMPANY LTD. Bijulee Bhawan, Paltan Bazar, Guwahati - 781.001 DIRECTORS REPORT To, The Members, Yours directors have the pleasure in placing before you the Third Annual Report together with the Audited Statements of Accounts and the Auditors Report of the Company for the year 2005-06 being the first year in which the Company became fully operational. FINANCIAL HIGHLIGHTS: (Rs._Inlacs Particulars 2005-08 | 2004-05 Total Revenue 2566580 | Profit before Depreciation, Inlerest 6 Taxes ee ee Depreciation - Inferest and Finance Charge 1667.26 - Profit before Tax (1516.54) Provision for Fringe Benefit Tax 8.84 : Profit after Tax eee (1525.38) z ‘Addr Profit brought forward from previous year - Profit(Loss) carried to Balance Sheet (1525.38) - Itmay be mentioned that the statement of accounts of the Company forthe financial year 2005-06 ‘was approved in the board meeting held on the 29 December, 2006 and subsequently forwarded to the Statutory Aucitors for their report thereon and to the Principal Accountants General of Assam for their comments thereon, The Comptroter & Auditor Genera of India had already furnished their comments on the concemed accounts and the same are being placed for consideration by the members, Dividend There being no proft available for appropriaon, the Directors have shown their inability to declare any dividend for the year under review. Power Sector Reforms ‘The Government of Assam under the Electricity Act, 2003 re-organised the erstwhile Assam State Electricity Board (ASEB) into five separate entities with functional responsibilities of generation, transmission, distribution. S APursuant to the enactment of the Electricity Act, 2003 the Government of Assam had issued various notification and transfer Schemes for vesting of the assets, liabiliies and personnel from the erstwhile Assam State Electricity Board (ASEB) to the Government of Assam and then re-vest the same in fo these five Companies, ie. one Generation Company, one Transmission Company and three Distibution Companies, including your Company. Your Company is one of the Distibution Company carved out of erstwhile Central Assam Distribution Zone of the Assam State Electricity Board In order to make all these Companies operational, the Department of Power (Elect) etc. Government of Assam notified the Final Transfer Scheme No. PEL.151/2003/Pt/349 dated 16" August, 2005 under which the value of assets and liabilities of the erstwhile Assam State Electricity Board (ASEB) as stated in Schedule !V of the said Transfer Scheme was vested on your Company and these values were considered as opering balance in the books of account of your Company while preparing the Final Account for the yeat 2005-06 and the Company was entitled to conduct the distribution activity independently as their own business and not as agent of ‘or on behalf of the Assam State Electricity Board. The Government of Assam vide its order No. PEL.197/2004/30 dated 17" December, 2004 had also transferred and permanently absorbed the personnel of the erstwhile ASEB into various Companies including your Company as per Transfer Scheme which was later on confirmed by the Government of Assam Status of the Company. ‘The status of the company as on 31.03.2006 was as follows - No. of circle :- 4 nos. namely i) Tezpur Electrical Circle, i)Nagaon Electrical Circle, ii)Cachar Electrical Circle, iv) Kanch Electrical Circle, No. of division 18 No. of subdivision :- 52 ‘Operation During the financial year 2005-06, the revenue from the sale of power amounted to Rs.25142.11 lacs. The Company purchased 915.96 MU of energy from the Assam State Electricity Board and sold 632.16 MU of units of energy to all categories of consumers. The overall transmission and distibuton losses reported to the extent of 31%. During the year under review, 55,009 nos. of new connections were given to new customers, oaAPDRP Scheme APDRP scheme was launched during the year 2005-06. The progress made under the said ‘scheme til March, 2006 could be enumerated as below :- New 33 KV line constructed 36.4 KM New 11KV line constructed 71.2 KM New LT lines constructed 34 KM R&Mof 11 KVline 1175.88 KM. R&Mof LT line 1165.05 KM. New DTR 241 NOS, R&MofDTR 76 NOS. Consumer metering 48340 nos Besides the above the works on number of sub-staions, lines, DTR, consumer metering, computerization of billing etc, was going on during that year. Tariff ‘Assam State Electricity Regulatory Commission (AERC) is the authority to regulate the tariff and ‘other matters of electricity utilities in the state and is entrusted with various functions, inter-alia, including the determination of retail tarif rates for the end users of electrical energy. During the year, your Company had filed the Tariff Petition with the AERC seeking approval of the Annual Revenue Requirement (ARR) forthe year 2008-07 Auditors The Comptroller and Auditor General of India, New Delhi, (CA & AG) appointed M/S Garodia & Associates, Chartered Accountants, Guwahati, as Statutory Auditors of the Company to carry out ‘the statutory audit of the Company for the financial year 2006-07 to be followed by the ‘Supplementary audit of the Comptroller and Auditor General of India. Auditors Report The report of the Statutory Auditors for the year financial year 2005-06 is appended with the Statement of Account. The replies of the Board of Directors to the report of the statutory Auditors is being enclosed as Annexure B to the Directors Report The comment of the Comptroller and Auditor General of India (CAAG) in pursuance of section 619(4) of the Companies Act, 1956 is being enclosed as Annexure - A to the Directors Report. The CAAG has no comment on the accounts of the Company. 3DIRE! Ason 315! March, 2006, the board of directors of the Company consisted of the following - Shri Subhast; Chandra Das, IAS, Chairman, Shri Uma Kanta Goswami, Managing Director, Shri D. N. Saikia, 1AS, Director, Shri M. K. Barooah, IAS, Director, Shri Girban Biswas, Director, Prof. Amiya Kumar Deb, Director and Smfi Kuntila Ranghangpi, Director. ctor's Responsil Statement In accordance with Section 217(2AA) of the Companies Act, 1956, your directors wish to inform that- ¢ in the preparation of the Annual Accounts for the financial year ended 314 March, 2006, the applicable accounting standards had been followed along with proper explanation retaing to material departures © the Directors had selected such accounting policies and applied them consistently and made judgment and estimates that are reasonable and prudent 50 as fo give a true and fair view of the state of affairs of the Company at the end of the financial year ° ‘the Directors had taken proper and sufficient care for the maintenance of atiequate accounting records in accordance with the provisions of this Act for Safeguarding the assets of the Company and for preventing and detecting fraud and other irregulatities, ° ‘the directors had prepared the accounts for the financial year ended on 31% ‘March, 2006 on a going concern basis. industrial Relation Industrial relation remained peaceful and cordial during the year under review. Fixed Deposits During the year under review, the Company did not accept any deposit under section SBA of the Companies Act, 1958. Cost Audit, The Ministry of Finance , Government of India, has not issued any Cost Audit Order under section 2338 of the Companies Act, 1956 to appoint any Cost Auditor during the year under review. S 4 7Particulars of employees ‘There was no employee during the year drawing remuneration in excess of the ceiling prescribed under the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended, Ener servation gad Technology Absorption etc. The disclosure requirement as to conservation of energy under the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are not applicable to the Company. Foreign Exchange Earning and Outgo ‘There was no foreign earning and outgo during the year under review, Acknowledgement ‘The Board of Directors wishes to thank the Government of Assam (Department of Power and other Department), Government of india (Miristyy of Power), the Central Electicity Regulatory Commission, the Assam State Electricity Board, Assam Electicity Regulatory Commission, various Financial Institutons, Suppliers and other Business Associates, Bankers, Consumers for their continued assistance, co-operation and patronage. The Company is also thankful to the Comptroller and Auditor General of India, the statutory auditors and consultants/advisors for theit suggestion and co-operation. The Directors express their deep sense of appreciation of all the employees, whose professionalism, commitment and initiative have made the organization's growth and success possible and continue to crive its progress. For and on behalf of the board Date :-18.03.2008 K. Das, AS) Place :- Guwahati ‘Chairman_ANNEXURE “AL COMMENT OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS OF CENTRAL ASSAM ELECTRICITY DISTRIBUTION COMPANY LIMITED FOR THE YEAR ENDED 31 MARCH 2006. The preparation of financial statements of Central Assam Electricity Distribution Company Limited for the year ended 31 March 2006 in accordance with the financial reporting framework prescribed under the Companies Act, 1856 is the responsibilty of the management of the company. The statutory auditor/auditors appointed by the Comptroller and Auditor Genera! of India under Section 619(2) of the Companies Act, 1956 is/are responsible for expressing opinion on these financial statements under section 227 of the Companies Act, 1956 based on independent audit in accordance with the auditing and assurance standards prescribed by their professional body the Institute of Chartered Accountants of India. This is stated to have been done by them vide their Audit Report dated 01-11-2007. |, on behalf of the Comptroller and Auditor General of India have conducted a supplementary audit under section 619(3) (b) of the Companies Act, 1956 of the financial statements of Central Assam Electricity Distribution Company Limited for the year ended 31 March 2006. This supplementary audit has been carried out independently without access to the working papers of the statutory auditors and is limited primarily to inquiries of the statutory auditors and company personnel and a selective examination of some of the accounting records. On the basis of my audit nothing significant ~ “has came to my knowledge, which would give rige to any comment upon or supplement the Statutory Auditors report under section 619 (4) of the For and on the behalf of the Comptroller and Auditor General of India Place: Guwahati \ \ Date: /) 9 9 - 02 \ Mage — (SWORD VASHUM) Principal Accountant General (Audit), AssamCENTRAL ASSAM ELECTRICITY DISTRIBUTION COMPANY LTD. Bijulee Bhawan, Pattan Bazar, Guwahati -781 001 REPLY OF THE MANAGEMENT TO THE AUDITORS REPORT (MARKED AS ANNEXURE -8) IN ‘THE DIRECTORS REPORT FOR THE YEAR ENDED 348' MARCH, 2006 Statutory Auditor's Comments Management Reply Transfer Scheme: The Government of the Assam Electricity Reforms First Transter Scheme, 2004 has transferred the Assels and Liabites of the ASEB to § successor companies including this company and in terms of the said scheme the company has been transferred Assets and Liabilties, 26 on st April, 2005, which are transferred en-block, in major heads. However detalod bifurcation and details, asso! wise and liabilty-wisa are not available and the same are not audited by us. The whole Scheme of Transfer “schemo was undertaken by M/s Price Water House Coopers, Kolkata and the same was approved by the Govt. of Assam, The Break up of Assets and Liabilities were produced to us in the form of Opening Balance Sheet (OBS). However further details as were requested by the Stalulory Auditors Could not be supplied by us as the same were nol available, 2) Inlerest on Loans availed for capita assets and 7 O° capital work in progress is not capitalised resulting in lower capitalisation of Fixed Assets and resultant effect on deprecation. This is nol in conformity with AS-6, AS-10 and AS-16. b) Contributions received from consumers towards capital assets aro not deducted from the asset value ‘of while calculating depreciation. This is not in conformity with AS-1 and AS-6, ‘@) Noled, Necessary affect will be given in the subsequent yoar. b). Noted. Necessary affect willbe given in the subsequent year Rs, 49,17,395.00 have been taken as prior period adustment despite of the fact thal the company has ‘commenced business from the current frrancial year, Though the Commercial aclviies slated Inthe year of 2005-06 certain matters were transferred to respective ‘companies while preparing the Accounts of ASEB. As 2 result Passing of entries through P/L Adjustment became necessary. @ Grants Fave nol been distinguished as capital or revenue. Thisis notin conformity with AS-12, b) Grants have been received by ASEB and bifurcated amongst the successor companies on a basis not reasonably explained. Noted. Necessary affect will be gven in the subsequent year Provision for Terminal Benefits has nol baen done on the basis of actuarial valuation, This is not in conformity with AS-15. The maltar of Actuarial Valuation of Terminal Benofits have already been taken with the SBI Life Insurance, Kolkala and the same is expected to be done as per AS-15 wat. FLY 2007-08,Repayment of Loans and payment of Interest is routed through ASEB. As such the actual receipt / prosf of payment were not avellable for our verifications, Cwil be taken up with ASEB for transferring financial | management function to CAEDCL. Interest on Staff Loans has not been provided. Staff Loan mainly comprises of Amount derived from 08S, Hence no interest was provided 2 As required by Schedule Vi to the companies Adi, 1956: i) Classifications of Sundry Debiors into Secured | Unsecured, Good | Doubtful or Bad, Dues from comparies under the same Management hes no! been done. {)Maximum amount due from Directors r officers of the ‘company at any fime during the year has not been disclosed, i) Age wise classification of Sundry Debtors has not been done, b) Confirmations have nol beer obtained from Debtors, {) Noted for future action, iNoted i) The same has already been disclosed in Noles on accounts. Noted for future action Interest on Consumer Security Deposis has boon calculated on the entire amount of seourty Deposit outstanding as al the end of the year, which is not in conformity with the actual iaily, ‘Arready the field units have been instructed to account for the liability & it is expected to reflect the actual liablity in the aecounts of FY 2006-07. The company was nol in-a position to furnish us the details of pending court cases, etc. agains{ the company. Hence we ae unable to comment on the contingent iabitty The audilors were explained that no such caso decision exists, Receivable 7 Payable from olher successor companies and ASEB ae not suppsred by confirmation of balances and reconciliation were not availabe for our vetiications, This is 2 reconciliation problem & the same is ‘expected to bo sorted out in the acoounts of F-Y.2006- 07 by silting with other 4 companias of ASEB. Uneecured Loans, GovioF Assam and Asian Development Bank Loans.» arent reconciledicontimmed. Noted. ~ Capital Work in Progress: Details of Capital work in Progress, Advance paid to sunplierscontractore are no available with the company. The field units are supposed to provide break-up of Capital Work in progtess witha a fortnight for EY. 2006.07 and the same would supplied to the Ausitors this year. ‘Advancas lo suppliers / Contractors comprise zaainly of the figures derived from OBS (PWC), The | remaining portion of Advances pertains to the FY. for Which the field units were insiructed to provide dolails.Investment: As teporied 10 us, Investment in fed doposits etc. are in the custody of ASEB and the same has not been made available to us for veiiction nor zany document produced avidencing the custody theraot Hence we could not verify the seme and interest thereon. It wil be taken up with ASEB for transferring financial ‘management function to CAEDCL. ‘took; There is @ difference of Rs.9,64,09 626.69 in the closing stock of inventory.(As per Books of Accounts. Rs.15,04,71,539.00 and as per summary of the physical Verification Report-Rs.5,40,61,712.31), The CAEDCL Board has already appointed professional firms as Internal Auditors for various Acoounting units, who will undertake various internal ‘control procedures including the stock verification, Sundry Deblors: The figure of Sundry Deblors as per Financial Ledgers, Consumers Ledgers, Revenue Reports and Sala of Power slalement ere subject to reconciliation. Reooncilalion work is under process. Cash: The Bank Reconciliation Statement contains several items outstanding for more than 6 months, dishonoured cheques etc. and several other items remaining un-explained ‘Noted for proper Accounting Treatment. Loans and Advances: The figures of Loans and Advances to Contractors, Steff and Others are not ‘supported by parly wise details or nature thereof into secured unsecured, recoverablalunrecoverable of provision required for un-recoverable amounis and no confirmation has been oblained. Loans and Advanoes comprise mainly of the Figures datived from OBS (PWC). The remairing portion of ‘Advances pertains to the F.Y. for which the field units wate instructed to provide details, Sundry Receivables: Amount recelvable from ‘employees and others are not reconciled/confirmed. ‘The whole amount is derived from OBS supplied by | PWC. Current Liabilities: Current liebiities under various heads are not reconcilediconfirmed. Slate Bank of India (Overdraft A/C) of Rs. 4, 22,79,617.00 is Secured Loan secured by Fixed Deposit. Details of the fixed Deposit are not available, The same has been disclosed under Current Labilties. This is not in conformity with Schedule VI to the Companies Act, 1956. Reconciliation work is under process, ‘Noted for future action iy Deposit From Consumers: Consumers Securily Deposits are not verifiable, 2s Security Deposit Registers ‘19 not maintained Field wile have already boon ins maintain security deposit registers and work out the figures of security deposst payable to the consumers. Revenue: Short and oF excess recovery on account of revenue from sale of power and related dues thereon have not been accounted for in the revenue account. Noted. 2s a